The Association for Financial Markets in Europe (AFME) and Linklaters, in collaboration with Irish law firm Arthur Cox, have published ‘Financial services conduct supervision: What to expect in four key EU jurisdictions.’ The report articulates the approach to conduct supervision taken by financial regulators in France, Germany, Ireland and the Netherlands. Nik Kiri, Financial Regulatory Group partner at Linklaters, commented: “Brexit means that global financial services firms need to forge new regulator relationships or deepen existing ones. Despite standardisation from EU law, national regulators still retain their own priorities and expectations. This report will assist firms navigating new ways of interacting with regulators, establish expectations and improve their understanding of the additional layer of scrutiny.” Richard Middleton, Managing Director, Head of Policy at AFME, said: “The consistent themes defining conduct supervision in Europe are the fair treatment of customers and the proper functioning of financial markets. These themes shape the overall purpose and priorities of the conduct regulators. The specific priorities at national level are determined by the structures, risks and behaviours of the markets. Our report aims to help Compliance teams meet the expectations of conduct regulators, and highlights current priorities such as AML, market misconduct, MiFID 2 and sustainability.” Key issues for 2020: Focusing on conduct supervision rather than prudential supervision (particularly where one regulator supervises both) and on supervision by national competent authorities rather than the ECB, the report clarifies: who the financial services conduct supervisor is; how they supervise; the current priorities; and specific approaches taken to the supervision of key activities. The report can be downloaded from the AFME and Linklaters’ websites. -ENDS-

AFME has today published a paper assessing the EU equivalence framework for financial services and providing recommendations to further enhance its functioning. The paper considers last year’s European Commission Communication and recent developments in the EU equivalence framework. The EU’s equivalence system is one of the most widely used cross-border regimes for financial services and plays an important role by effectively regulating market access and international relationships. In the paper, AFME proposes key objectives for the EU’s relationship with third countries and core principles which should underpin equivalence. It also makes a number of recommendations to further improve the functioning of the regime and strengthen relationships with third countries to ensure continued connectivity with international financial markets while effectively managing risks to financial stability, market integrity and investor protection. The paper addresses the EU’s relationship with third countries generally as opposed to the specific future relationship with the UK post Brexit. Oliver Moullin, Managing Director at AFME, said: “It is important to ensure continued close connectivity between the EU and international capital markets. Relationships with third countries should be further strengthened including through improving the transparency and certainty of the equivalence process and further enhancing regulatory and supervisory cooperation with third country authorities. “This will support continued connectivity with international financial markets, minimise unnecessary fragmentation and maximise benefits for consumers of financial services across Europe. It will also allow the EU to effectively manage risks to financial stability, market integrity and investor protection.” The paper advocates that for EU capital markets to thrive, alongside developing the EU financial ecosystem, it is important to maintain and continue to develop open capital markets that are able to provide investors and businesses with access to international capital, investment and funding opportunities while preserving market integrity and fairness of competition between EU firms and third country entities. AFME believes that the following objectives should underpin the EU’s relationships with third countries with respect to financial services: promoting open, competitive capital markets and minimising barriers to cross-border business, and maintaining market integrity, financial stability, fair competition and investor protection in the EU; preserving choice for investors; creating a stable and transparent framework to provide certainty; and developing arrangements for close supervisory and regulatory cooperation. AFME proposes four key principles which should be considered in the context of equivalence determinations: decisions should be proportionate and risk-sensitive, based on sound regulatory and supervisory arrangements; the equivalence assessment should be focused on alignment of regulatory and supervisory outcomes in the area under consideration; there should be transparency in the decision-making process; and decisions should be made in a timely manner and provide certainty and stability for market participants. The paper can be downloaded from the AFME website. -ENDS-

NEW YORK & LONDON, December 19, 2019 – The Association of Financial Markets in Europe (AFME), Futures Industry Association (FIA), International Capital Market Association (ICMA), International Swaps and Derivatives Association, Inc. (ISDA) and International Securities Lending Association (ISLA) have published a new agreement intended to simplify reporting across different European Union regulatory regimes. The Master Regulatory Reporting Agreement (MRRA) gives market participants an option to use a single template to help them manage regulatory obligations and provide services related to reporting under the European Market Infrastructure Regulation (EMIR) and the Securities Financing Transactions Regulation (SFTR). Use of a common template for all reporting relationships under the two rule sets will bring greater efficiency and consistency to the regulatory reporting process. The MRRA sets out common terms governing mandatory and delegated reporting of derivatives transactions under EMIR, compatible with changes introduced via EMIR Refit, as well as securities financing transactions under the SFTR. The agreement has also been drafted with a view to ensuring these terms remain effective post-Brexit. The MRRA was developed with the assistance of committees and working groups established by AFME, FIA, ICMA, ISDA and ISLA, comprising representatives from both buy- and sell-side firms with expertise in derivatives and securities financing transactions. The MRRA is available here, and an explanatory memorandum setting out the architecture and background to the MRRA is available here.

Today, the Association for Financial Markets in Europe (AFME), together with international law firm Simmons & Simmons, have published the first in a series of papers, entitled ‘LIBOR Transition: Managing the Conduct and Compliance Risks’. The paper provides practical guidance to Senior Managers and Legal and Compliance teams on managing conduct risks posed to firms engaged in the transition away from the London Interbank Offered Rate to Risk Free Reference Rates. This first paper in this series identifies ways in which firms can seek to mitigate the key conduct risks posed by LIBOR transition when establishing their governance structure. The publication of this guide follows the release of the FCA and PRA’s Dear CEO letter on Libor transition, subsequent FCA Feedback document, and the recent release of the FCA’s Questions and Answers on some of the conduct and compliance expectations during the transition period, which is scheduled to conclude by the end of 2021. The paper analyses qualitative responses from AFME’s Compliance Committee member firms, to understand the challenges in implementing risk management measures, and duly responds with suggested steps to establish a robust governance structure to mitigate conduct risk. Rather than offering a prescriptive checklist that may only apply to a handful of firms, the paper takes a broader view, basing the guidance on the fundamental understanding that different firms will be impacted by the LIBOR transition in different ways. Richard Middleton, Managing Director, Head of Policy at AFME, said: “It is vital that banks consider an effective governance framework for their LIBOR transition process. The FCA and PRA have highlighted the need for firms to identify and manage conduct risks, building mitigating actions into their planning for the transition.” LIBOR Leads Penny Miller and Elizabeth Williams at Simmons & Simmons, commented: “We are delighted to have co-authored with AFME the first in this series of market-leading papers, offering AFME members and the wider industry much-needed guidance for their Compliance teams when navigating the challenging landscape of LIBOR transition. We hope that it will serve as a helpful platform for wider industry and regulatory dialogue on how to manage the complexities associated with LIBOR transition and we look forward to working with the AFME Compliance Committee on the second part to this series.” Download the report here. -ENDS-

Following the publication of the final report by the European Commission’s Expert Group on Regulatory Obstacles to Financial Innovation (ROFIEG), James Kemp, Managing Director, Head of Technology and Operations at AFME, said: “This latest report is key to furthering the digital agenda in Europe over the course of the next Commission mandate. A strong technology agenda is essential for the EU to remain competitive and at the forefront of global innovation. Future success will depend on the ability to achieve long-term benefits from new technologies.” “AFME looks forward to supporting the work of the European Commission to ensure that there is a regulatory environment that nurtures innovation and helps EU financial institutions to take advantage of the vast range of opportunities FinTech presents.” AFME in particular welcomes the following parts of the report: The case made for harmonisation. The need to reduce fragmentation and ensure greater coordination and consistency in regulatory approaches is a pre-requisite for the development of a strong Financial Technology (FinTech) ecosystem in Europe. In this respect, the role allocated to the European Supervisory Authorities (ESAs) to ensure more effective coordination of innovation hubs and regulatory sandboxes is very welcome. The focus on ensuring a level playing field, notably through enhancement to the frameworks governing access to data, which is vital for supporting future competition. AFME recommends that EU authorities monitor and carefully analyse the impact of increased competition from new market entrants with a view to assessing the potential effect in areas such as financial stability, cyber security and resilience, data sharing and protection, consumer protection and lending standards. The endorsement of the principle of technology neutrality. A technology-neutral, principles-based approach is needed to encourage the adoption of new technologies, as well as for addressing any ethical and transparency concerns that may raise. The focus on ensuring strong consumer and investor protection. New technologies will only be adopted if users and customers can trust them. In this respect, it is important that the Commission takes steps to ensure that the potential financial stability and consumer protection risks linked to the development of FinTech are appropriately monitored. -ENDS-

Following today’s Announcement by the European Commission on the European Green Deal, Michael Cole-Fontayn, Chairman of AFME, said: “This European Green Deal is a material signal of the prominent role that the environment will play in the new Commission legislative cycle and will help to develop Europe’s global leadership on sustainable finance.” The banking sector is strongly committed to the transition to a carbon-neutral economy and AFME members remain highly supportive of initiatives that help to further integrate environmental, social and governance (ESG) considerations in the products and services offered to consumers and investors. The Commission’s intention to launch a new and more ambitious Action Plan on Green Financing is also a positive step which will encourage sustainable finance to become a more mainstream part of the European economy. AFME continues to support the industry in achieving the following key objectives, among many others: Ensure the smooth implementation of the EU-wide taxonomy of sustainable activities; Develop pragmatic approaches to climate risk management and risk sensitive approaches to the prudential treatment of sustainable assets; Work to implement agreed changes to corporate reporting and disclosures of climate related information. -ENDS-

In response to ESMA’s final report on the prices for market data and the consolidated tape for equities, Sean Barwick, Associate Director of Equities at AFME, said: “AFME welcomes ESMA’s final report on the price of market data and the consolidated tape for equities. Importantly, ESMA has recognised that the overall price of market data has increased and that pricing is not typically based upon the costs of producing and disseminating market data. Increased transparency requirements will help market participants and regulators to scrutinise pricing structures meaning that market data should be charged on a ‘reasonable commercial basis’, as required by MiFID II.” “We look forward to working with policymakers and regulators to ensure that ESMA’s proposals on market data are implemented and AFME looks forward to contributing to further dialogue on the establishment of a consolidated tape.” -ENDS-

Following a speech by the European Commission today in London, Oliver Moullin, Managing Director, Brexit, at AFME said: "We welcome the confirmation that the European Commission intends to extend the temporary equivalence decision for UK CCPs. This is vital to enable continued access to clearing and settlement services for EEA firms and avoid a significant risk to financial stability in a no-deal Brexit scenario. It is important that the extension is confirmed as soon as possible. "We hope that regulators in the EU27 and UK will continue to work together to address remaining regulatory issues, including finding a permanent solution to ensure access to UK CCPs and avoiding disruption to trading shares and derivatives in a no-deal scenario.” Notes to Editors: Together with 13 other trade associations, AFME recently wrote to European Commission Vice President, Valdis Dombrovskis to highlight the need for an urgent extension to the temporary equivalence determination for UK CCPs.

The Association for Financial Markets in Europe (AFME) has today published a new paper setting out fiverecommendations to deliver supervisory convergence on the regulation of crypto-assets in Europe. The paper’s recommendations are intended to encourage collaboration between regulators in Europe and work towards a common approach to the regulation and development of crypto-assets in financial services. James Kemp, Managing Director, Head of Technology and Operations at AFME, said: “There has been a rapid rise in the development of crypto-assets, which could offer significant benefits for wholesale markets. However, to realise those benefits, it is increasingly important that crypto-asset regulation is coordinated at the regional and global level to foster innovation, while promoting financial stability and ensuring a level playing field. This should start with forming a common understanding of the various crypto-asset terms and activities in financial services”. In this paper, AFME provides an overview of the crypto-asset taxonomies and regulatory approaches in use by a sample of National Competent Authorities across Europe, outlining the areas where divergence in regulation exists. The paper finds that while there is some convergence on the methods used to classify different types of crypto-assets, there is significant divergence in the methods used to regulate crypto-assets. This creates uncertainty for market participants, which limits innovation. Europe has the potential to become a global leader in crypto-assets and to facilitate the emergence of safe and innovative products and services at scale. In order to reduce fragmentation and deliver supervisory convergence in the regulation of crypto-assets in Europe, AFME proposes the following five recommendations for regulators to consider: Establish a pan-European crypto-asset taxonomy; Provide clear expectations for market participants on the process for issuing crypto-assets; Apply activities-based and technology agnostic regulation; Apply existing regulation for regulated activities, with any necessary amendments if required; Prioritise convergence of regulatory frameworks with other global and regional initiatives. The paper has been developed with expertise from AFME member firms to provide a further assessment of the crypto-asset regulatory landscape in Europe. It is available to download on the AFME website. -ENDS-

Today, 14 financial services trade associations wrote to European Commission Vice President, Valdis Dombrovskis to highlight the need for an urgent extension to the temporary equivalence determination for UK central counterparties (CCPs). Without such an extension, EU clearing members would not be able to continue as direct members of UK CCPs in the event of a no-deal Brexit, and EU counterparties would not be able to clear derivatives subject to the clearing obligation on those CCPs. The current temporary equivalence expires on 30 March 2020. The 14 trade associations signing the letter are AFME, FIA, ISDA, FIA EPTA, EFET, DAI, Eurelectric, SSDA, Assosim, AIMA, MFA, EFAMA, SIFMA AMG and EBF. The signatories of today’s letter argue that without a seamless ability to continue to clear transactions across borders in the event of a ‘no-deal’, Brexit will have a significant impact on companies and on the safety and soundness of the financial system. As argued in the letter: “It is important for the purpose of maintaining financial stability in the event of a "No Deal" Brexit for the Commission to provide this certainty in a timely fashion. It is also an important bridging measure to ensure that the transitional, anti-disruption protections for EU counterparties that have been negotiated under EMIR 2.2 will be available in the event that the UK is not ultimately found to be equivalent or in the event that UK CCPs are not able to obtain recognition (although we emphasise that we consider that it is of vital importance for financial stability that the necessary arrangements are put in place to ensure that UK CCPs are able to obtain recognition under EMIR 2.2).” The Associations request that the Commission amend the Implementing Decision on UK CCPs to extend the temporary equivalence until the date 18 months after entry into force of the relevant Commission delegated acts under EMIR 2.2, plus an additional three month period to allow UK CCPs to serve termination notices to EU clearing members in the event that their recognition is withdrawn following ESMA's review.” The letter can be downloaded here. -ENDS-